As Oil Supplies Are Stretched, Rebels, Terrorists Get New Clout Media-Savvy Guerrillas Roil Global Oil Prices in Fight With Nigerian Government

CHIP CUMMINS – The Wall Street Journal

Copyright – The Wall Street Journal
April 10, 2006; Page A1
WARRI, Nigeria — The list of people with big influence over the $2 trillion-a-year global oil market has long been an exclusive one, topped by Saudi princes and American presidents. This year, someone calling himself Jomo Gbomo emailed his way into the club.
Since January, the obscure Nigerian rebel group that he claims to speak for has battled Nigeria’s military, blown up oil facilities and kidnapped foreign oil workers. All the while, Mr. Gbomo (pronounced BO-mo) has fired off emails to the international media taking responsibility for the attacks or threatening new ones — and often roiling global oil prices in the process. (See a timeline of attacks and emails.)
“All pipelines, flow stations and crude loading platforms will be targeted for destruction,” he wrote hours before a violent attack in mid-February that helped drive oil prices in New York up by more than $1 a barrel. A later email to The Wall Street Journal that also lists the sender as Jomo Gbomo declares: “The fact that we have influenced the price of world oil, no matter how little, and caught the attention of the foreign media indicates we are on the right track.” The email’s author says that name is a pseudonym. The real identity of the writer is a mystery.
The media-savvy guerrilla group’s emergence as a market mover points to a mounting problem for the U.S. and other big oil consumers: maintaining energy security in an era of scarce oil resources and ever-longer supply lines. With today’s tight oil markets, even small disruptions — or the threat of them — can jolt the world economy, leading to higher costs of gasoline, airline tickets and other goods for consumers everywhere. (See related article.)
That dynamic is giving new power to rebels, terrorists and ornery governments. Al Qaeda is targeting oil facilities in Saudi Arabia, the world’s No. 1 exporter. A foiled terrorist attack there helped send prices up more than $2 a barrel in February. Some Iranian officials have threatened to block the flow of oil from the Persian Gulf if the United Nations imposes sanctions over Tehran’s suspected nuclear-weapons program. Now even Mr. Gbomo’s small group, armed with little more than machine guns and an email account, has realized that it, too, can use oil as a weapon on the global stage.
Mr. Gbomo’s group, the Movement for the Emancipation of the Niger Delta, or MEND, wants local control of the region’s oil wealth, along with the release of two imprisoned delta leaders. It hopes that by shaking up world markets it can bring international pressure on Nigeria’s government to respond to its demands.
Oil sabotage is a longstanding insurgency tactic. Joseph Stalin organized strikes by oil workers in the Caucasus in the early 1900s to weaken the czar. But the number and widening geographic scope of attacks and threats today has the oil industry and governments scrambling to safeguard the world’s oil supply.
Sen. Richard Lugar, Republican chairman of the Senate Foreign Relations Committee, is pushing a bill that would lead to coordination with big, new oil consumers like China on developing emergency stocks and other measures to handle major oil disruptions. The European Union is considering rules to bolster security at energy installations with costly tools like fences and sensors. The International Energy Agency, a Paris-based energy watchdog, estimates it will take $3 trillion in spending over the next 25 years on new oil infrastructure to insulate the world from shocks.
Under the Carter Doctrine of 1980, the U.S. committed to defending its interests in the Persian Gulf, the source of almost two-thirds of world oil reserves. That led to a military mobilization in the region that cost the U.S. some $20 billion a year since the 1980s, according to a relatively conservative estimate by Amy Myers Jaffe, an energy-security expert at Rice University.
Since then, as the U.S. has diversified its energy sources, the challenge of protecting supplies has grown. The list of unstable oil-exporting regions now includes West Africa, Central Asia and South America.
Africa is particularly worrisome, given its growing supply role and political instability. The continent now pumps just over 10% of global oil output, and Houston consultancy IHS estimates it will provide about a third of the world’s new oil by 2010. Nigeria alone accounts for 3% of today’s global supply. Yet far from evolving into a hedge against Mideast turmoil, the region has become a risky new chokepoint.
Oil has been a source of discord in the Niger Delta almost since it was discovered here in 1956 by Royal Dutch Shell PLC. Ethnic minorities have fought Nigeria’s federal government, and each other, over oil benefits. Ransom kidnappings and smuggling flourish. Endemic corruption means little oil wealth reaches communities near the wells. Warri, the western delta’s oil capital, is a crime-ridden sprawl of rutted streets and cinderblock shops.
For security, Shell and other oil companies long relied on government forces that they subsidized. Shell also used cash to keep the peace, putting locals on the payroll for nonexistent jobs or doling out payments to community leaders. In 2003, Shell banned such practices, and now relies largely on funding development projects — about $25 million in 2004 — to generate good will.
Shell executives declined to discuss most details of their security procedures in Nigeria or elsewhere, citing safety concerns for staff. “We continue to take necessary measures to ensure the safety and security of staff, contractors and the people in the communities where we operate,” Shell said in a statement.
The surge in oil prices since 2003 has turned the long-simmering delta from a local nuisance for the oil industry into an international economic flash point. Growing demand whittled away the world’s spare capacity of idle oil wells that producers can tap in a crunch. The U.S. invasion of Iraq further crimped supplies. Around that time, Niger Delta rebels began playing the global oil game.
‘All Out War’
In September 2004, Mujahid Dokubo-Asari, a delta warlord whom the Nigerian government had accused of oil smuggling, declared “all out war” on the government. Annkio Briggs, a senior aide to Mr. Asari at the time, says the warlord’s comments were carefully crafted and timed to move global prices. Carried by news agencies, the remarks helped push New York futures prices above $50 a barrel for the first time.
[Mujahid Dokubo-Asari]
“We were aware of the price of oil, and we were aware that it was dependent on supply and demand, and we were aware that supplies had to be stable,” says Ms. Briggs in an interview. “We looked around at other countries that were big producers, and we could see anytime there was a crisis the price of oil would go up, so it didn’t take a lot of intelligence or mathematics to figure it out.”
After a temporary peace with Mr. Asari, the Nigerian government arrested him last September on treason charges. Asari loyalists demonstrated in Port Harcourt, the delta’s biggest city. In late December, unknown militants blew up a critical Shell pipeline.
Shortly after that, the group calling itself MEND made its first appearance. On Jan. 11, three speedboats packed with rebels attacked a Shell facility off the Nigerian coast. They engaged a Nigerian navy boat, forcing it to retreat, and then machine-gunned a Shell-chartered support vessel. No one was injured, but the rebels boarded the boat and kidnapped four foreign contractors. In a separate but coordinated attack, gunmen also blew up a Shell pipeline.
Afterward, the first email from Mr. Gbomo surfaced, claiming responsibility for the attacks on behalf of MEND. “We are capable and determined to destroy the ability of Nigeria to export oil,” he wrote in the email, sent to reporters. In New York the next day, oil prices soared more than $1 on the kidnapping news, before retreating by the session’s close.
The incident rattled big oil companies, which have invested billions of dollars in Nigerian offshore oil production that once seemed insulated from turmoil on land miles away. Shell worried that boat trips to its large field called EA, about nine miles offshore, were no longer safe, and shut down production there.
The U.S. Navy has stepped up deployments in the waters off Nigeria. The U.S. has also given Nigeria a handful of old Coast Guard vessels, and American soldiers have trained Nigerians on small-boat tactics in the delta’s creeks. But Nigeria’s army and navy remain ineffective “Right now, I don’t know how far offshore [the rebels] can go,” says Brig. Gen. Elias Zamani, former commander of a Nigerian military unit fighting the militants here.
Details about MEND and its self-described spokesman are scarce. Mr. Gbomo doesn’t give interviews in person and declines to provide information on his own age, location or background, except to say that he is male and is part of the “nerve centre” of MEND. In recent weeks, he has sent out detailed field reports after attacks to more than a dozen local and foreign reporters. These accounts, along with his threats of future attacks that actually do pan out and his knowledge of the movement of hostages, appear to corroborate his assertion that he is close to the leadership of MEND. But the extent of the connection couldn’t be verified.
The Niger Delta is home to numerous youth gangs whose loyalties shift between political, ethnic or tribal leaders. Experts say that MEND has brought new cohesion to that mix. Its attacks have so far prompted Shell to evacuate hundreds of staff from the western delta and to shut down roughly 455,000 barrels of daily production, about a fifth of Nigeria’s total output. “MEND seems to show much more sophistication using Nigeria’s contribution to the energy market to advance its goals,” says a Western official who has studied the group. “We hadn’t really seen this targeted activity before.”
Mr. Gbomo does reply to emailed questions, although it’s not clear from where. Internet cafes are plentiful in the Niger Delta. Mr. Gbomo’s emails, which all come from the same Yahoo account, carry an electronic tag that suggests they were sent via a computer in South Africa. But they could have originated elsewhere. U.S. officials believe there’s a clear link between Mr. Gbomo and the MEND attacks, but it’s unclear if law enforcement officials have tried to follow his email trail.
Umbrella for Militant Groups
In one recent exchange, Mr. Gbomo described MEND as a new umbrella for several militant groups that have been fighting in the delta for years. He said MEND’s forces number in the hundreds. “We are not communists or even revolutionaries,” he wrote. “Just a bunch of extremely bitter men.”
Chief W.O. Okirika, a community leader in the delta who has had contact with MEND leaders, says the group consists of local residents who want the government to start distributing oil wealth to the community. If the government doesn’t, he says, “the militancy of the youth will increase and the pipeline attacks will escalate.”
Four days after its first attack, on Jan. 15, MEND raided a Shell oil-pumping station in the delta, exchanging heavy fire with soldiers guarding it. Fourteen soldiers and two caterers working for Shell were killed, either shot or drowned, according to Shell and the Nigerian military.
In emails to reporters afterward, Mr. Gbomo demanded the release of Mr. Asari, the imprisoned rebel leader, and a local delta governor recently jailed on corruption charges. He promised “a series of very significant attacks” and called for all oil workers to leave the area. The next trading day in New York, prices leapt more than $2 a barrel. Newswires quoted traders and analysts blaming the price spike on the Nigerian unrest, as well as growing concern about Iran’s standoff with the West.
[Flash Points]
At the rebel base camp, the kidnapped foreign contractors from the Jan. 11 attack slept on mattresses and were provided bottled water, cigarettes and tins of sardines, according to a later account from one of the hostages, Nigel Watson-Clark. The rebel group’s apparent leader preached to the hostages about the delta’s destitution. Mr. Watson-Clark, an old West Africa hand, came away persuaded that the group was different than the typical Nigerian kidnapping ring out for ransom.
“They made it perfectly clear that they weren’t interested in money,” he said in a telephone interview from his home in the U.K. late last month. “The main demand was that all [foreigners] would have to leave the Niger Delta, and they had to have some sort of control over their resources.” After 19 days, MEND released the hostages unharmed.
Then, on Feb. 15, helicopter gunships under the command of Nigerian Gen. Zamani opened fire on several suspected smuggling barges near Warri. Community leaders said the raid killed villagers and damaged homes. Gen. Zamani denied that, but was relieved of his command last month.
Three days after the helicopter attacks, just past midnight in Nigeria, Mr. Gbomo sent an email to journalists warning of a MEND reprisal. A few hours later, gunmen swarmed a barge near an oil-export terminal run by Shell and kidnapped nine employees of Willbros Group Inc., a Houston contractor. On the next day of trading in New York, prices jumped more than $1 a barrel.
Mr. Gbomo sent out digital photos of the hostages, surrounded by masked men brandishing machine guns. In late February, he arranged for a group of reporters to board speedboats and rendezvous with several boatloads of gun-toting MEND members. In a second, similar meeting, the group surprised reporters by turning over one of the hostages, Macon Hawkins, a 69-year-old Texan with diabetes. They freed the rest over several weeks. After they released the last three hostages in late March, oil prices dropped 10 cents a barrel on the news.
But in a mass email after the release, Mr. Gbomo said MEND wasn’t backing down. Caring for the hostages had tied down 800 men who could be better used attacking oil facilities, he said. “Oil companies and their workers should not be deceived into a false sense of relief,” he wrote. Financial newswires flashed his comments, helping send crude up almost $2 a barrel the next day.
–Christopher Rhoads contributed to this article.